Don’t meddle with FOFA reforms, warns Ripoll

The Parliamentary secretary to the Treasury,
Bernie Ripoll
, has warned against making further changes to complex reforms such as the future of financial advice (FOFA) reforms being pushed through by the federal government.

Mr Ripoll, who was chair of the parliamentary joint committee on corporations and financial services that investigated recent adviser collapses including Storm Financial, said that most of the financial services groups had accepted the changes.

Investors and their financial advisers face more political uncertainty this year, with both major parties disagreeing over the best way to protect client interests and strengthen superannuation safeguards.

Paul Fletcher
, a Liberal Party member of the same parliamentary committee, said yesterday that a future coalition government would make significant changes to the federal government’s planned FOFA reforms and improved superannuation governance.

These changes would include independent directors on superannuation fund boards and mandatory disclosure of remuneration and conflicts of interest.

Mr Fletcher said that he was “very alive" to the demand from advisers and the funds management industry for a moratorium on changes to rules about advice and savings, particularly in superannuation.

However, he said that “a more serious and fundamental issue is that this is a system under which people accumulate savings over a period of 30, 40 or 50 years – yet face the risk of governments changing the rules on a regular basis".

“Just in the last few years for example, the contribution limits on concessional contributions for those over 50 were reduced from $100,000 to $50,000 to now $25,000," Mr Fletcher said.

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“That has played havoc with the plans made by many Australians to save heavily through superannuation in their 50s – after they have got the kids through school and paid off the house."

The financial services sector, which accounts for about $1.8 trillion of the nation’s savings, most of it in superannuation, has long complained about the cost, scale and complexity of the planned FOFA changes.

A 12-month extension ending July 1, 2013 was granted to the industry to bed down the reforms, many of which require large-scale changes, particularly for life insurance and fund managers with large heritage systems.

The industry is concerned about ongoing confusion and costs if the FOFA reforms are not bedded down or if superannuation policy becomes a political issue.

Peter Kell, a commissioner for the Australian Securities and Investments Commission, said it would initially be “facilitative" with companies during the transition to the FOFA reforms.

He said ASIC would be open to discussions with the industry where difficulties arose.

“ASIC also now has new enforcement powers, including the capacity to remove problem advisers. One of the observations about the industry has been that it was too easy to get in and too hard to get someone out," Mr Kell said.

ASIC was criticised after Storm Financial’s collapse for not having moved faster to close it down.